This paper investigates the impact of related party transactions on a firm’s operating
performance and market-based performance, as well as the impact of institutional ownership on the use
of related party transactions. Using a sample of 1218 deals from S&P1500 firms from 2007 to 2018, we
propose and examine three relevant hypotheses: (a) related party transactions, especially, “Red-flag”
related party transactions are negatively related to firm’s operating performance, (b) related party
transactions, especially, “Red-flag” related party transactions are negatively related with firm’s marketbased performance, (c) institutional ownership is negatively related with related party transactions.
In summary, we do not find a significant relationship between related party transactions and
firm’s operating performance, such as ROA, Profit Margin and COGS. As for firm’s market-based
performance, we found related party transactions are positively related with Tobin’s-Q, but are not
significantly related with 12-months buy and hold abnormal return. Finally, we do not find any
significant relationship between overall institutional investors and RPTs, but we find short-horizon
institutional investors reduce the use of related party transactions, but long-horizon institutional
investors do not limit the use of RPT
| Identifer | oai:union.ndltd.org:uottawa.ca/oai:ruor.uottawa.ca:10393/42537 |
| Date | 13 August 2021 |
| Creators | Cui, Jingyu |
| Contributors | Dutta, Shantanu |
| Publisher | Université d'Ottawa / University of Ottawa |
| Source Sets | Université d’Ottawa |
| Language | English |
| Detected Language | English |
| Type | Thesis |
| Format | application/pdf |
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